Kenya, President Ruto torpedoes government after anti-tax protests

First the backward step on the finance bill and the opening to 'dialogue', now the repulse on his own executive. Kenya's President William Ruto torpedoed almost the entirety of his cabinet on 11 July, a rift in response to the street protests that erupted at the end of June against the tax hike planned in the budget bill for the fiscal year starting in July. The only one left afloat is the Prime cabinet secretary and head of foreign affairs, Musalia Mudavadi, in a coup that also blew away Attorney General Justin Muturi.

Ruto announced the decision in a televised address, declaring the start of 'consultations' for a 'broad-based' government to assist him in the 'necessary, urgent and irreversible implementation of radical reform programmes' on fronts that include debt reduction, job creation and anti-corruption. The International Monetary Fund, one of the country's maxi-creditors, is monitoring the situation and may make changes to the $976 million financing expected by 2025.

The axe on the ministers is the culmination of the review process initiated by the Kenyan leader after protests erupted against the tax hike envisaged in the 2024-2025 budget bill and intended to raise USD 2.3 billion in revenue. After the hard line of the first few hours, which degenerated into more than 40 casualties, Ruto beat a retreat on the text and announced the opening of a confrontation with the most sensitive electoral base: that of 'Generation Z', the generation of very young people at odds with central power in Nairobi. Now the scenario that seems to be announced is that of a sort of government of national unity, with the Kenyan newspaper East African foreshadowing a confrontation also with the Orange Democratic Movement: the opposition party led by the eternal challenger Rail Odinga, defeated in 2022 in his fifth run for the Nairobi leadership.

Ruto is trying to regain consensus in a country still shaken by last month's uprising, starting with the bloodbath of 25 June: the breaking point of demonstrations that had always taken place in a peaceful atmosphere, only to escalate to the point of storming the local parliament (Nationl assembly) and clashing with the repression of local security forces. The protests had been inflamed by a series of tax increases, also applied to sensitive goods such as bread, and intended to raise over USD 2 billion: a 'cushion' that the International Monetary Fund's demands to adjust fiscal soundness had been welcomed. Ruto then scrapped the manoeuvre en bloc, without providing clarification as to how and when it would compensate for the loss of revenue included in the first bill.

The uncertainty has already alarmed foreign investors and has cost Nairobi a - further - cut in its credit rating, with Moody's downgrading its rating from B3 to Caa1: a further descent into junk status, brought about by the 'significant' reduction in the 'ability to implement revenue-based fiscal consolidation that would improve debt affordability and bring it down'. In particular, reads the agency's note, "the government's decision not to pursue planned tax increases and to rely instead on spending cuts to reduce the fiscal deficit represents a significant policy shift with major implications for Kenya's fiscal trajectory and financing needs."